Soluna’s Project Dorothy 2 Prepares to Deliver $14M in Potential Operating Profit

Rhea-AI Summary

Soluna Holdings, Inc. announces the clearance of the modeling phase for its 50 MW data center in Texas, marking a significant step towards finalizing financing and bidding process. The project includes a Bitcoin hosting expansion and a new AI data center, showcasing a compelling financial profile with potential for significant revenue generation.

Positive

• Approval in ERCOT modeling process for Project Dorothy 2 marks a crucial milestone for Soluna Holdings, Inc.
• Project Dorothy 2 will house a 48 MW Bitcoin Hosting expansion and a 2 MW specialized AI data center, named Helix.
• The project is expected to be one of the lowest-cost facilities in North America, with the potential to generate up to $14 million in additional annualized project-level operating profits.
• Soluna Holdings' CEO, John Belizaire, highlights the efficiency gained from the experience of energizing the first phase of Project Dorothy, leading to faster implementation of Project Dorothy 2.
• The financial model for the project is based on reasonable assumptions but may be influenced by external factors beyond the Company's control.

Negative

• None.

Insights

Financial Analyst

The progression of Soluna Holdings, Inc.'s Project Dorothy 2 through the ERCOT modeling phase is a pivotal development for the company and its stakeholders. The ERCOT (Electric Reliability Council of Texas) process is critical for ensuring that the data center's energy demands can be met without compromising the stability of the Texas power grid. Successfully navigating this phase suggests that Soluna is on track to secure the necessary approvals to proceed with construction and operation.

From a financial perspective, the potential addition of $14 million in annualized operating profits from Bitcoin Hosting revenue is a significant figure. It implies a robust revenue stream that could enhance the company's profitability and attractiveness to investors. The claim of Project Dorothy 2 being one of the lowest-cost facilities in North America could also signal competitive advantage in the energy-intensive data center market, potentially leading to higher margins and market share gains over time.

However, it is important to scrutinize the assumptions underlying the company's financial models, as they are subject to external factors beyond the company's control. Investors should consider the volatility of Bitcoin and its impact on the data center's profitability, given the cryptocurrency's fluctuating value and mining profitability. Additionally, the long-term sustainability of such projects is contingent on the evolving regulatory landscape around energy consumption and environmental impact.

Energy Market Analyst

The co-location of Project Dorothy 2 with a wind farm is a strategic move that aligns with the broader industry trend towards sustainable and renewable energy sources. This not only mitigates environmental impact but also caters to the increasing demand for green computing solutions. The renewable energy aspect could provide a hedge against fluctuating energy prices, which is a critical factor in the operation of energy-intensive businesses like data centers.

ERCOT's approval process is stringent, designed to maintain grid reliability amid fluctuating and intensive loads. The fact that Project Dorothy 2 has cleared the modeling phase indicates that the project's energy consumption patterns are compatible with grid stability. This is crucial as Texas has experienced significant energy challenges, particularly during peak demand periods or extreme weather events.

For the broader energy market, the integration of large flexible loads like data centers poses both challenges and opportunities. These facilities can provide grid services such as demand response, where they reduce consumption during peak periods to alleviate grid stress. As such, Project Dorothy 2's advancement may be indicative of the future direction of data center integration into energy markets, with implications for grid planning and renewable energy utilization.

Technology Sector Analyst

The announcement that Soluna Holdings, Inc. is expanding its capacity for Bitcoin mining and AI applications is indicative of the growing intersection between renewable energy and high-performance computing. The specialized 2 MW AI data center, Helix, highlights the company's diversification strategy within the data center market, targeting specific high-growth areas such as artificial intelligence.

Bitcoin mining has been criticized for its environmental impact due to the high energy consumption. Soluna's approach to co-locate with renewable energy sources addresses this criticism head-on, potentially setting a precedent for environmentally responsible cryptocurrency mining practices. This could be a differentiating factor that appeals to both environmentally conscious investors and clients who prioritize sustainability.

The technology sector is increasingly focused on reducing carbon footprints and Soluna's project aligns with this priority. Moreover, the speed and efficiency improvements mentioned by the CEO in bringing Project Dorothy 2 online could reflect operational excellence and an ability to scale effectively. Such capabilities are critical in the fast-paced technology sector where rapid deployment of infrastructure can be a competitive edge.

The 50 MW Data Center Clears the Modeling Phase in the ERCOT Process

ALBANY, N.Y.--(BUSINESS WIRE)-- Soluna Holdings, Inc. (“SHI” or the “Company”), (NASDAQ: SLNH), a developer of green data centers for intensive computing applications including Bitcoin mining and AI, announced today Project Dorothy 2, its 50 MW data center co-located at a wind farm in Texas, has passed the modeling phase in the ERCOT Large Flexible Load approval process. Approval in ERCOT modeling is a significant step to begin the bidding process and finalize financing for this major expansion of the Company’s flagship project.

The financial model for Project Dorothy 2 was prepared internally based upon the same assumptions used by management in evaluating potential projects, which management believes are reasonable but are affected by factors beyond the Company’s control. (Graphic: Business Wire)

Bitcoin and AI Datacenters - Project Dorothy 2 will be the home of Soluna’s 48 MW Bitcoin Hosting expansion and its new 2 MW specialized AI data center, called Helix.

John Belizaire, CEO of Soluna Holdings, commented, “Through our experience successfully energizing our 50 MW first phase of Project Dorothy, we have a blueprint to bring Project Dorothy 2 online faster and more efficiently. Passing modeling allows us to now focus on building out Project Dorothy 2 for a mix of Renewable Computing applications, such as AI and Bitcoin mining.”

Compelling Financial Profile - Project Dorothy 2 is the second phase of Soluna’s flagship 100 MW data center, powered by renewable energy. It is expected to be one of the lowest-cost facilities of its kind in North America. According to the company’s financial modeling, Project Dorothy 2 has the potential to generate up to $14 million of additional annualized project-level operating profits¹ for the Company in Bitcoin Hosting revenue. The project forecasts an outstanding return on invested capital, returning capital invested in about 27 months.

Low Carbon Footprint - In late August 2023, the Company completed the construction and fully ramped Project Dorothy 1. A study done by a third party (REsurety) in early 2024 found the 50 MW site outperforms traditional data centers with an 18% lower carbon footprint while substantially reducing the burden on the electric power grid typically associated with traditional data centers. Project Dorothy 2 is on schedule to continue this trend of low carbon footprint data centers.

Shovel Ready - The next steps in the process for the new site includes completion of the construction bidding process including final construction costs for the first 48 MW, and finalizing financing options for the Bitcoin Hosting facility. To date, Soluna has received several proposals for financing Project Dorothy 2 and is close to completing diligence.

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "confident" and similar statements. Soluna Holdings, Inc. may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including but not limited to statements about Soluna’s beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties, further information regarding which is included in the Company's filings with the Securities and Exchange Commission. All information provided in this press release is as of the date of the press release, and Soluna Holdings, Inc. undertakes no duty to update such information, except as required under applicable law.

In addition to figures prepared in accordance with GAAP, Soluna from time to time presents alternative non-GAAP performance measures, e.g., EBITDA, adjusted EBITDA, adjusted net profit/loss, adjusted earnings per share, free cash flow, both on a company basis and on a project-level basis. Project level measures may not take into account a full allocation of corporate expenses. These measures should be considered in addition to, but not as a substitute for, the information prepared in accordance with GAAP. Alternative performance measures are not subject to GAAP or any other generally accepted accounting principle. Other companies may define these terms in different ways.

About Soluna Holdings, Inc (SLNH)

Soluna is on a mission to make renewable energy a global superpower using computing as a catalyst. The company designs, develops and operates digital infrastructure that transforms surplus renewable energy into global computing resources. Soluna’s pioneering data centers are strategically co-located with wind, solar, or hydroelectric power plants to support high-performance computing applications including Bitcoin Mining, Generative AI, and other compute intensive applications. Soluna’s proprietary software MaestroOS(™) helps energize a greener grid while delivering cost-effective and sustainable computing solutions, and superior returns. To learn more visit solunacomputing.com. Follow us on X (formerly Twitter) at @SolunaHoldings.

¹ The financial model for Project Dorothy 2 was prepared internally based upon the same assumptions used by management in evaluating potential projects, which management believes are reasonable but are affected by factors beyond the Company’s control.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240314083214/en/

Sam Sova

Partner and CEO

SOVA

Sam@letsgosova.com

Source: Soluna Holdings, Inc.

FAQ

What is the name of the company mentioned in the press release about the 50 MW data center in Texas?

Soluna Holdings, Inc.

What is the ticker symbol for Soluna Holdings, Inc.?

SLNH

What is the name of the 50 MW data center project mentioned in the PR?

Project Dorothy 2

What is the capacity of the Bitcoin Hosting expansion in Project Dorothy 2?

48 MW

What is the expected annualized project-level operating profit potential for Project Dorothy 2?

$14 million

Who is the CEO of Soluna Holdings, Inc.?

John Belizaire

Where is Project Dorothy 2 located?

Co-located at a wind farm in Texas

What type of applications will Project Dorothy 2 cater to?

Renewable Computing applications, such as AI and Bitcoin mining

What is the significance of passing the modeling phase in the ERCOT process for Project Dorothy 2?

It allows the company to begin the bidding process and finalize financing for the expansion project.

What is the primary focus of Project Dorothy 2?

Building out for a mix of Renewable Computing applications, such as AI and Bitcoin mining